Tort Reform – In Texas, A Legislative Innovation that has Cut Costs and Eased the Doctor Shortage

Preface: Democrats say malpractice costs are overstated. They cite a CBO estimate, based on settled malpractice awards, that tort reform would cut only 0.5% of health costs. Republicans and doctor retort by saying malpractice fears, defensive medicine, and a litigious practice climate account for 25% of health costs.

A survey of 598 cardiologists, just published online in Circulation, found 27% of cardiologists say colleagues order catherizations for defensive purposes . In other words, cardiologists do catherizations they might otherwise not have have done to ward off potential malpractice suits, “Doctors Still Say Malpractice Fears Add to Health-Care Costs,” WSJ Health Blog, April 13, 2010.

Which leads to today’s blog on innovation – in this case, a legislative innovation by Texas legislators which capped malpractice awards in 2003. This legislative act lowered doctors’ practice costs and malpractice premiums, It doubled the number of doctors outside of Texas applying for a medical license in Texas. More people ought to look to Texas, the nation's leading state in job creation. One Austin, Texas, hospital company, Seton Family of Hospitals, is building three new medical centers and hiring 2300 people, many of them doctors and nursed drawn by its innovative health care climate.

“Q: What do you regard as your greatest accomplishment at the Texas Medical Association?”

“A: Our 2003 tort reform effort falls into the category of a major accomplishment for the state of Texas. That reform put a cap of $250,000 for noneconomic damages for physicians, a $250,000 cap for hospitals, and another $250,000 cap for a second hospital or nursing home. This is referred to as a stacked cap ($250,000 for each party). The total is $750,000, but only $250,000 of that falls on the doctor’s side.“

“This model appeals to legislators, because it’s fair and differentiates among physicians and other providers in the system. The model also helps attract physicians to a state. Before we passed our tort reform, Texas was losing its liability carriers. But now we have 15 or more in the state, all competing for the business.“

“Most important, access to care was shrinking in rural and other underserved areas. But during this past year, the number of physician licenses increased from 2000 to 4000, and physicians—both primary care and specialist--are now settling and practicing in underserved parts of Texas, such at the Rio Grande Valley. The specialists no longer restrict access to high-risk procedures through fear of liability penalties. Patients are getting better care, and highly specialized procedures are being done. This is all attributable to the tort reform legislation.“

Q: “Is it true that medical malpractice insurance premiums also have dropped in Texas?”

“A: Yes, premiums have dropped by 50% or more, and the largest carrier, Texas Medical Liability Trust, is actually providing a dividend to physicians. Also, carriers have been able to rebalance their reserves. So we can stabilize the market, and bring more doctors in to provide coverage.”

It is mind-boggling to me that serious malpractice legislation wasn't considered in this most recent "health system reform" package. Here in Texas, we have an excellent example that has decreased costs and increased access to care. We will happily offer our state's solution as a template. Giving everyone insurance will not guarantee access to care - a constructive change to our malpractice climate just might...

While it's true there were some positive benefits in Texas from their tort reform efforts, lower health care spending was not one of them.

Malpractice insurance companies passed on most — but not all — of the savings in the form of lower premiums. Increased profitability in malpractice insurance is the reason the malpractice insurance providers have grown in number. But providers did not pass their savings on to patients or health insurance companies.

Providers raised pay for nurses, bought new equipment, spent the savings other things, and saw higher profits, but health care spending did not go down in Texas.

Furthermore, the part where tort reform attracted doctors from other states hurts health care in those states because it takes doctors away from them. It's impossible for tort reform to attract more doctors to every state because doctors moving to one state have to be leaving another state.

A lot of people claim tort reform will lower health care spending, but the data on actual health care spending — not malpractice insurance premiums — in states where tort reform has been implement does not support that claim.

The Health Reform Maze

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Book Description: In this first book in a series of four, Richard L. Reece, MD. provides a unique view of the roll out, and run up, of the Affordable Care Act. Reece shows in this book the progress and facets of ObamaCare's marketers and messengers, as the day approached for the launch of health insurance exchanges - the single most public and problematic portion of the new law. This is a must read for anyone who wants to chronicle this attempt to organize more than one-sixth of the U.S. economy by adding layers of federal government control and regulations.

Reece has been writing about U.S. health care for more than 45 years. His knowledge and experience, added to his keen intellect and gift of subtle humor, make this book a valuable part of anyone's collection.